TransCanada Corp. could develop a rail bridge from Canada to Nebraska if the northern portion of the controversial Keystone XL pipeline continues to be held up by the U.S. government, president and CEO Russ Girling said Tuesday.

Supporters and foes of TransCanada Corp.’s Keystone XL pipeline are bracing for the release of an environmental analysis from the U.S. government that could determine the US$5.4-billion project’s fate.

While the report isn’t the final step, it’s eagerly anticipated because it will answer a question central to whether President Barack Obama approves the project: would Keystone contribute significantly to climate change?

The Calgary-based company has ongoing dialogue with railways and oil companies about options to Keystone, and “if we need to bridge with rail, we will bridge,” Mr. Girling said in an interview.

“I don’t think we would ever stop pressing the pipeline option, but there is a point in time at which we would consider a rail option,” he said.

The company is awaiting the release any day of a much-delayed final environmental impact statement by the U.S. State Department on the $5.4-billion, northern leg of the cross-border project to carry oil from Canada’s oil sands all the way to U.S. Gulf Coast refineries.

The department has jurisdiction because the pipeline crosses an international border. The southern leg, known as the Gulf Coast Project, was fast tracked because it didn’t need approval and is due to start delivering oil on Jan. 22.

A Canadian regulatory panel is scheduled to release a recommendation on the Northern Gateway pipeline from Alberta to the British Columbia coast on Thursday. Northern Gateway was proposed by Enbridge Inc., TransCanada’s rival. The two projects are a big part of Canada’s push to open markets for Canada’s growing oil production.

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Mr. Girling expects the U.S. review, now in its sixth year, to show the northern leg of the project will have minimal environmental impact. A draft of the statement released in March came to the same conclusion.

The final document’s release triggers a 90-day national interest determination that could lead to a final decision by U.S.President Barack Obama as soon as the end of the first quarter, Mr. Girling said.

While continuing to hope for a permit, Mr. Girling said he fears the project, turned by the U.S. environmental movement into a symbolic test on whether the U.S.President is serious about fighting climate change, will once again get caught up in politics.

Mid-term U.S. congressional elections are scheduled for November 2014.

By forcing oil companies to look at these alternatives, doing it by rail, we are actually increasing GHG emissions

President Obama rejected an earlier permit application ahead of the 2012 presidential election, after environmentalists threatened to pull their campaign support and Nebraska said the pipeline would impact a sensitive ecosystem.

TransCanada re-applied in May 2012 with a new route through Nebraska, which won approval from the state in January.

TransCanada could quickly ramp up a rail/pipeline combination. It is building rail facilities at Hardisty, in Alberta, and could build more in Steele City, Nebraska.

The rail bridge would fill the Keystone gap by funneling oil from Alberta into TransCanada’s base Keystone pipeline, and then into the Gulf Coast Project.

Mr. Girling has been critical of the boom in oil-by-rail because it’s less safe than pipelines.

But with rail cars travelling unrestricted across the Canada/U.S. border, he expects oil by rail to become a big part of the future for TransCanada, while pipelines wait for regulatory approvals, which are taking twice as long as they used to due to environmental movement opposition.

Already, 400,000 to 500,000 barrels a day of oil will move out of Western Canada by rail next year, increasing to one million barrels a day by 2015, he said.

Harold Hamm, chief executive of independent oil producer Continental Resources Inc., one of the companies that committed to ship crude on Keystone, told Reuters Tuesday that his company and the U.S. oil industry in general are no longer counting on Keystone.

Continental has signed on to ship some 35,000 barrels of its own oil from the Bakken field of North Dakota on the 1,179-mile, $5.4-billion Keystone line.

Mr. Girling said the rail boom will not replace Keystone.

The oil industry is ordering thousands of rail cars so it has more transportation options, rather than take big price discount while waiting for pipelines to be built.

TransCanada is also looking at completing parts of Keystone’s northern portion with the exception of the border crossing – the Alberta portion is already under development and the southern portion from Montana through South Dakota and Nebraska could be built to collect oil from U.S. Bakken fields.

The two parts would be linked if and when there is regulatory approval.

Still, Mr. Girling said he would love to have a dialogue with environmental groups about actually reducing GHG emissions.

“By forcing oil companies to look at these alternatives, doing it by rail, we are actually increasing GHG emissions,” he said.

“But nobody will engage in a dialogue with me because (Keystone) is too big of a boom for them, for their ability to raise money. They’d rather keep this symbol.”